GST Officers Should Not Pressurise Taxpayers To Pay Tax Not Following Procedure: Delhi High Court

The Delhi High Court has held that it is impermissible for the officers to pressurize the taxpayers to pay tax without following the requisite procedure, notwithstanding that it may be apparent that such tax is due and payable.

The bench of Justice Vibhu Bakhru and Justice Amit Mahajan has observed that the assessee's statement cannot be read as acknowledgement of any liability to pay ITC. It merely records that the visiting team informed the petitioner that the registration of the supplier, M/s Samridhi Exports, had been cancelled. It cannot be read as the petitioner acknowledging that he was liable to reverse the ITC in respect of purchases made from the dealer.

The petitioner/assessee is in the business of trading PVC resin under the name of M/s Shivani Overseas. The petitioner is registered under the CGST Act and has been assigned the Goods and Services Tax Identification Number.

On October 7, 2022, continuing until the early hours of October 8, 2022, a search was conducted by the respondent or department at the petitioner's business premises under Section 67 of the CGST Act. It was on the basis of authorization (in form GST INS-01) issued by the respondent in terms of Rule 139(1) of the CGST Rules.

During the course of the search operation, documents pertaining to the period FY 2017–18 to FY 2021–22 were inspected. The petitioner alleged that during the course of the inspection, the visiting team of officers forced him to reverse the input tax credit (ITC) amounting to Rs. 18,72,000 in respect of supplies purchased from M/s Samridhi Exports. The petitioner was informed that the GST registration of the supplier was cancelled retrospectively.

The petitioner stated that he was detained in the office from 4 pm on October 7, 2022, to 2.30 am on October 8, 2022. The petitioner succumbed to the intimidation of the visiting team and was compelled to transfer the amount of the ITC.

The respondents issued a show cause notice to the petitioner under Section 74 of the CGST Act, proposing a demand including an interest penalty for the period of April 2022 to February 2023.

The petitioner has assailed the SCN and has filed the petition, being aggrieved by the failure on the part of the respondents to refund the amounts, which he claims were deposited involuntarily and under duress during the course of the search.

The assessee contended that he was coerced into filing Form DRC-03 and debiting the available ITC under duress and coercion without adjudication of any liability or any demand, in accordance with law.

The department contended that the deposit of tax by debiting ITC from the ECL was involuntary. The petitioner had made a statement admitting to the liability, which was not retracted.

The court directed the respondents or department to reverse the ITC of Rs. 18,72,000 deposited by the petitioner on October 8, 2022, and forthwith credit the same in his ECL.

“This would not preclude the respondents from taking any other steps in accordance with the law. In the event the Commissioner or a duly authorized officer has reason to believe that the ITC available in the ECL of the petitioner has been fraudulently availed of or is ineligible, the concerned officer is not precluded from passing an appropriate order, including any order under Rule 86A of the CGST Rules, if the conditions as set out therein are satisfied. The respondents are also not precluded from taking steps to protect the interest of the Revenue in accordance with law,” the court said.

Counsel For Petitioner: A. K. Babbar

Counsel For Respondent: Rajeev Aggarwal

Case Title: Lovelesh Singhal Prop Shivani Overseas Versus Commissioner, Delhi Goods And Services Tax & Ors.

Citation: 2023 LiveLaw (Del) 1273

Case No.: W.P.(C) 16353/2022

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